Ferguson (FERG): The HVAC Play That Hasn’t Run Yet

A few weeks ago, I revisited my thesis on Comfort Systems USA (NYSE: FIX) as a pure-play HVAC stock riding the secular tailwinds of cooling demand, sustainability retrofits, and data center buildouts. I still think FIX has further to run, and you can read why here. But I can also understand why some people might think the stock has already priced in a lot of its upside … after all, it’s up over 100% in the past 6 months. 

Luckily, there’s another name in the same ecosystem that hasn’t run nearly as hard … and it actually offers something extra. Here’s why this HVAC stock is B rated (Buy) according to our Zen Ratings system:

Ferguson = HVAC + Plumbing + Water

Ferguson (NYSE: FERG) is best known as a plumbing distributor, but HVAC is now one of its fastest-growing businesses. That means you’re still getting exposure to the same HVAC labor shortage and infrastructure upgrade themes that have powered FIX higher.

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On top of that, Ferguson adds diversification with its Waterworks segment, tied to public works, pipelines, and municipal projects. This is a huge plus … because while residential demand can swing with housing cycles, infrastructure and water are steadier, longer-term drivers.

Why FERG’s Attractive Now

• FIX has already re-rated higher. Investors recognize its position as an HVAC leader, but it leaves less margin of safety.
• FERG hasn’t had the same breakout (yet). It’s just getting back to former all time highs. Its broader mix (plumbing, HVAC, waterworks) also makes it steadier and less cyclical.
• Water exposure = inflation protection. Public works and infrastructure budgets tend to rise with costs, giving Ferguson pricing power and demand visibility.

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Ferguson is also:

• Expanding its private-label HVAC brand (Durastar) to capture more margin.
• Rolling up smaller competitors in a fragmented market.
• Returning cash through a $1B buyback authorization.
• Investing in digital platforms like Ferguson Home to keep customers sticky.

It may not move as dramatically as FIX, but that’s the point … Ferguson gives you a cheaper entry into HVAC growth, with the added ballast of plumbing and water infrastructure.

It’s arguably both a safer play, and one that hasn’t moved yet on a lot of the datacenter hype driving FIX. 

You can see it in our Component Grades: FERG earns a B in safety while FIX scores a C. This means FERG has more stock price stability, consistency of cash collections, and less fluctuations in analyst predictions. And safety is crucial in stock-picking. 

Ferg also scores a B in 4 other Component Grades. Click here to see which ones. 

Bottom line? If you’re still on the sidelines, Ferguson could be another winning HVAC play with more diversification and less downside risk. At a B rating, it’s worth a closer look now. Click here to add it to your watchlist.

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